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EnerCom's Oil & Gas 360 Closing Bell

November 25, 2015

CRUDE OIL INVENTORY/’000 bbls (Week Ended 11/20/15)

Current: 488,247

Actual Build/(Withdrawal): 961
Economist Average Estimate: 1,195
Previous: 487,286

Click here for the chart with five year averages.

Stephens Investment Banking - Building Blocks of a Stronger Oil & Gas Industry

*Fossil Fuel v. Renewable Energy: Did Green Slip through the Door while North American Oil & Gas Companies were Busy Creating the Shale Boom? – Oil & Gas 360®

Remember the iconic 1960-era engineer? He wore a pocket protector in the shirt pocket of his short-sleeved white dress shirt. He usually had two or three ballpoint pens sticking up next to a small slide rule—he was the symbol of a culture that respected and emphasized things like science, math, logic and precision, a culture for which automotive designers put rocket-like fins on the back of heavy steel cars powered by 8-cylinder engines. The American culture is vastly different today. – Read More

*The surprising case for $100 oil – CNBC

One of the biggest stories over the past year and a half has been oil’s epic tumble, which has reduced the price of a barrel of crude from nearly $110 to just more than $40. But one strategist says the commodity is set to stage a striking turnaround. According to Emad Mostaque, a strategist at consulting company Ecstrat, crude oil is now trading at what is known as “half cycle costs”; that is, roughly the cost of getting the oil out of the ground. His point is that $42 oil does not account for other important costs like that of finding the oil or purchasing the land in which the crude is situated. – Read More

*Bernie Sanders: ‘To Hell With the Fossil Fuel Industry’ – Forbes

Talk about feeling the Bern — the socialist candidate just told millions of workers that their companies and their jobs and their cars can go to hell. During a speech Saturday in South Carolina, Sen. Bernie Sanders launched into a harangue against political donations to conservative and libertarian causes from people like the Koch brothers and other energy-industry groups. According to a report from The Hill, Sanders said that climate change allegedly induced by carbon emissions “is already causing devastating problems all over this world.” – Read More

*OPEC a Year Later: Who Will Adapt and Survive? – Oil & Gas 360®

Last November 27, OPEC sparked the decline in crude oil prices that would see both international benchmark Brent crude, and U.S. benchmark WTI crude, lose more than 50% of their value. The group decided to move away from its traditional role of maintaining a reasonable crude oil price in order to protect its market share around the world in the face of higher production from hydraulic fracturing in the United States. The OPEC decision, which the group finalized on Thanksgiving Day 2014, fundamentally changed the landscape of global oil markets. – Read More

*Mexico to Receive $6.4 Billion from 2015 Oil Hedges – The Wall Street Journal

Mexico’s program of annual oil hedges to partially protect the federal budget from sudden shocks in world oil prices will pay off handily this year, with Finance Minister Luis Videgaray on Tuesday estimating the December payout at $6.4 billion. “The hedges we acquired last year to protect a price of $74.60 per barrel, which without a doubt is a higher price than what we saw during the year, will be paid in early December,” Mr. Videgaray told reporters. “Our estimate is that they will be for an amount of $6.4 billion, or about 104 billion pesos.” Mexico spent $773 million on the hedging contracts for this year. – Read More

*Moroccan refinery’s debts highlight oil sector lending dangers – Reuters

When Morocco’s only oil refinery suspended production in early August due to financial difficulties, it owed $450 million to trading houses, including Glencore, Vitol and BB Energy, according to traders and refinery sources familiar with the situation. While the amount is relatively small compared with the balance sheets of large trading houses, it underscores simmering trouble in high-risk, high-margin developing regions that did not insure themselves against the steep decline in oil prices. – Read More

*Resolute Energy Enhances Balance Sheet with $177.5 Million Non-core Asset Sale – Oil & Gas 360®

Resolute Energy (ticker: REN) has agreed to sell its Gardendale assets for $177.5 million, concluding a “limited marketing process” that began in late September. The buyer was not named. The company has now sold nearly $275 million in assets since March 2015, including the divestures of its Midland Basin and Powder River Basin assets for $42 million and $55 million, respectively. The proceeds of all asset sales to date are being used to pay down debt. Prior to the most recent Gardendale sale, REN management said it had already reduced borrowings by $150 million pending the completion of its Power River Basin acreage. – Read More

*U.S. Airlines Bet on Long Oil Slump as Millions Lost to Hedging – Bloomberg

Two of the world’s biggest airlines are betting that oil prices won’t rally any time soon, growing more cautious after losing hundreds of millions of dollars on hedges. United Continental Holdings Inc. and Delta Air Lines Inc. have reduced fuel hedging as oil plunged close to a six-year low. They’ve become more like American Airlines Group Inc., the biggest global carrier, which closed its last hedging position in 2014.“ There is a growing realization that American’s approach was the smarter one,” Bob Mann, president of airline consultant R.W. Mann & Co., said in a phone interview. – Read More

*The Oil Price Crash Could Be The Best Thing That Happens To The Saudi Arabian Economy – Forbes

It’s obviously extremely odd to assert that a crash in the oil price could be good for the economy of an oil producing nation. Yet, in the longer view, this could well be true, given the existence of what we call Dutch Disease. This is just a short hand for the pernicious effects upon an economy of relying upon the exports of a natural resource. Effectively, that natural resource becomes so profitable to do and everything else so unprofitable that there’s very little economy other than that natural resource. That’s not good for the long term health of a place and ending that situation could therefore be beneficial for that long term. – Read More

*Oil Rigs Take Another Dip – Oil & Gas 360®

The United States total rig count fell again this week, continuing a trend started last year when OPEC announced it would not defend oil prices. The total rig count fell by 10 this week to 757, with all of the last rigs coming from the oil patch, according to Baker Hughes (ticker: BHI). Last week, the oil rig count broke a 10-week streak of declines, but low prices saw the number of rigs in the oil patch sink further in the week ended November 20, 2015. The oil rig count fell to 564 this week, with most of the lost rigs located in the Permian basin. – Read More

*Energy Downturn Spreads Beyond the Oil Patch – The Wall Street Journal

The prolonged slump in crude prices is rippling beyond the oil industry into areas of the North American economy that, until recently, had managed to avoid the worst of the downturn. With the crude-market decline in its 17th month and nearly a year after OPEC dealt prices a sharp blow by refusing to rein in output, lower profits and mounting losses are crimping budgets, spurring multiple rounds of job cuts and driving some energy companies to seek bankruptcy protection. Signs of that distress are spreading throughout once-booming oil-producing regions across North America. – Read More

*Husky Energy Sanctions Next Phase of 80 MBOPD Modular Heavy Oil Projects – Oil & Gas 360®

Husky Energy (ticker: HSE) announced today that the company sanctioned the Rush Lake 2 project, a 10,000 barrel per day (MBOPD) modular heavy oil thermal project, and the next phase in the company’s plans to produce 80 MBOPD from such projects by the end of 2016. Rush Lake 2 will be located in Saskatchewan, and will come online in late 2018, according to the company. Alberta-based Husky has increasingly been focused on increasing production from low capital-cost projects like Rush Lake 2, which is based around a modular design. – Read More

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable.  This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note.  This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results.  EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services.  In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies.  As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note.